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Gunther Tichy

Happiness is increasingly named as a target of policy measures. Apart from the confusing fact that the attention-grabbing catchword ‘happiness’ refers to ‘life satisfaction’ in most cases, this approach appears preferable to alternatives as utility functions, magic polygons or to the opaque decisions of politicians. A life-satisfaction-oriented policy would prove welfare-improving, focusing on fair distribution of income and wealth, social goals and institutional goals such as health, freedom and social capital. However, these advantages would come at a price: medium-term life satisfaction goals would clash with longer-term aspects resulting from behaviour which is not aimed at sustainability, yet has a direct impact on it. The second problem is that the respondents can misjudge the satisfaction resulting from their choices, and may not be aware of the (longer-term) consequences of their decisions. Furthermore, policy cannot control some of the central elements of life satisfaction, which means that citizens will sooner or later discover that policy cannot live up to its promise. ‘Happiness’ as a policy goal cannot relieve politicians from constantly assessing trade-offs and sustainability and searching for compromises among the conflicting ideological positions.

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Gunther Tichy

The ageing of the European population gave rise to heated discussions. Most participants recommended severe reductions of public pensions, a shift towards a funded system and increased savings of the current generation to reduce the burden of the next one. The paper elaborates five counterarguments: (1) The total burden will not increase much, as the additional pensioners are partly compensated by a reduced number of unemployed. (2) Even with 1 percent growth per capita GDP will be some 60 percent higher in 2050, which should suffice to increase the living standard of the old and the young. (3) The real burden cannot be shifted, and a shift of the financial burden can prove counterproductive. (4) The pay-as-you-go system should not be abandoned, as it covers wider and more severe risks than a funded one. (5) Surveys show clearly that the population appreciates a public pension scheme and prefers higher contributions to reduced pensions.

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Gunther Tichy

The traditional debate on the real and financial consequences of ageing is based on two assumptions: a deteriorating old-age dependency ratio and declining productivity of an ageing population. Both suppositions are questionable. Relevant for the future burden is not the old-age dependency ratio but the relation of the working to the non-working part of the population, which will deteriorate only slightly as the number of unemployed and of early pensioners will decline as a consequence of the shrinking working-age population. The productivity of an ageing society may increase even if individual productivity shrinks with ageing: this is a consequence of the increasing disability-free life expectancy and of factor-price induced higher capital intensity. The coming problems of ageing are, therefore, less threatening than suspected in the popular and in parts of the professional literature, especially under some supporting labour market policy.